Real estate assets make up a large portion of the domestic and global economy and traditionally have been exploited arenas of investment by banks, institutions, corporations, REITS, pensions, endowments and private investors. However, private investors have long had a need for a low cost, direct, efficient method for bidding on and/or investing in real estate assets (“RE asset(s)” or “asset(s)”).
Private real estate partnerships have historically been a primary avenue for fractional direct investment in RE assets; however, such partnerships typically involve excessive general partner fees and require limited partners to relinquish part of the future upside associated with their investment in the RE asset. Public entities or real estate investment trusts (REITs) are available liquid vehicles to acquire and hold RE assets for individual investors; however, they are subject to (a) the volatility of the stock market, (b) dilution from stock options and secondary offerings, and (c) decision-making that often benefits the near-term stock price of the company rather than the long term interests of stockholders.
Private investors who have the financial wherewithal and real estate knowledge to acquire a RE asset directly have a unique opportunity to compete against larger institutions, REITS, banks and professionals. However, investors in today's fast paced investment marketplace have virtually no options available to directly invest in RE assets by acquiring fractional interests that may be offered in smaller ownership balances than typical, in a low cost and efficient manner.
Accordingly, there is an immediate need to provide an apparatus and methodology enabling investors, via an automated exchange and utilizing the internet, to acquire fractional interests and/or “micro ownership” interests in RE assets in a low cost, efficient environment by bidding directly for such ownership interests in RE assets, by way of novel securities that will be referred to herein as “real estate asset fractional securities” (“REAFS”) and/or by way of whole real estate assets. As described herein, REAFS ownership may also be referred to using alternate terminology, such as real estate fractional securities (REFS), real estate asset micro securities (REAMS), micro real estate ownership securities, micro property securities, micro real estate securities, micro real estate, micro mortgages, or real estate partnership securities.